Rehashed neoliberal policies: One year of Dutertenomics

June 28, 2017

by IBON Foundation

The Philippines is in a worsening socio-economic crisis. The direction of economic policies under the Duterte administration is alarming and in urgent need of correction. The government’s economic team still uses the anti-development policy framework of past administrations which will mean greater economic distress for the majority of Filipinos.

The economy’s poor performance since June 2016 is due to the neoliberal policies of previous administrations mostly being continued by the current government.

Jobs crisis amid growth. Despite growth reported as among the fastest in the world, the economy actually shed jobs with less employment since April last year. Massive unemployment includes millions of discouraged workers. The quality of work continues to decline with worsening contractualization and informal work, among others, and falling real wages.

The Philippine Statistics Authority (PSA) reported slowing economic growth in the first quarter of 2017 at 6.4% from 6.6% the previous year. Still, a recent World Bank report cited the Philippines as among the 10 fastest growing economies in the globe.

The PSA also reported lower unemployment and underemployment (5.7% and 16.1%, respectively) in April 2017 compared to the previous year. Official figures however also show that the number of employed Filipinos actually fell by 393,000 to 40.3 million in April 2017 from 40.7 million the year before.

A drop in the labor force participation rate (LFPR) was also observed: LFPR fell to 61.4% which is the lowest in 36 years since the country’s severe economic crisis in 1982 under the Marcos dictatorship. This implies that the labor force shrunk by 575,000 in April 17 from the year before despite the 1.4 million increase in the labor force population of 15 years old and over. This is most likely due to ever-growing numbers of discouraged workers dropping out of the labor force after failing to find jobs.

Poor-quality work persisted. IBON estimates that there are still 11.5 million Filipinos who are in without work or still looking for more work because of the poor quality of jobs. There were 24.4 million citizens in low-paying and insecure work with little or no benefits in 2016. The Department of Labor and Employment (DOLE) issued Department Order (DO) 174 but this does not really address contractualization which will remain prevalent in the country.

Workers’ wages have been eroding. The gap between the National Capital Region (NCR) minimum wage of P491 and the family living wage, estimated by IBON at Php1,119 for a family of six in 2016 also grew from the year before. The two-tiered wage system which assigns a floor wage that is below minimum and a management-determined productivity allowance further devalues the minimum wage.

Weak economic base. The basic reason for the economic slowdown is weak domestic demand from high unemployment and low incomes, backward agriculture, and shallow foreign-dominated manufacturing. These are all the result of neoliberal policies: a cheap-wage economy, agricultural liberalization and minimal rural development, trade liberalization and foreign investor-biased industry, and over-reliance on global markets. The political controversies in the last year only aggravated these weak growth fundamentals.

Even though official poverty statistics appeared lower as of 2015, IBON considers government’s count of 21.9 million poor to be in extreme poverty using the very low threshold of P60. IBON estimates 66 million Filipinos to be struggling on P125 daily or less. Meanwhile, the real value of the average daily basic pay (ADBP) received by workers has fallen in the last 15 years and is lower today than in 2001. Meanwhile, that the net worth of the 40 richest Filipinos grew by 13.8% from 2015-2016 while workers’ real wages grew by -0.1% in the same period indicates how workers do not benefit from reported rapid growth.

The manufacturing sector’s contribution to the economy has been stagnant while that of the agriculture sector has significantly shrunk to a mere 18% by yearend 2016 from more than 40% many decades ago. This shows that economic growth is not happening in the production sectors that could create jobs, raise incomes and can be the basis of local industrialization. Philippine governments have implemented neoliberal policies through the decades in the name of increasing foreign investments to purportedly generate jobs and usher development, but have only succeeded in facilitating growing wealth and profits for the richest few families and biggest corporations at the people’s expense.

Anti-development policies. It is business as usual for foreign capital and oligarchs under the government’s 0+10-point economic agenda and the Philippine Development Plan 2017-2022. These prevent real agrarian reform, agricultural development, and national industrialization.

Economic problems were clear even at the start of the Duterte administration. Yet instead of addressing these, its neoliberal economic team is actually deepening the implementation of failed market-based policies. The Duterte government has continued implementing policies that have allowed corporate interests to plunder the country’s natural resources including land and water; privatized and raised the cost of public utilities such as water, power and telecommunications; commercialized and made inaccessible especially to the poor majority social services such as education, health and housing. Business interests looking to build back war-pulverized Marawi are already being observed.

Moreover, the administration’s economic managers have actively opposed reforms that can benefit the people such as proposals for a moratorium on land use conversion and banning large-scale miners. The private sector has also been given the upper hand in rice importation and in the determination of the prices of basic goods and prime commodities contrary to the State’s mandate to ensure the availability and affordability of the people’s most fundamental needs. Correcting these can strategically contribute to solving the proliferation of illegal drugs more than can the bloody war against drugs, which has only led to thousands of casualties mostly from poor, under-served communities.

The government’s so-called comprehensive tax reform package is especially onerous. This reduces taxes paid by wealthy families, foreign investors, and domestic big business and off-sets this with higher consumption taxes paid by the majority of poor Filipinos. Benefits for the poor are made up or grossly exaggerated.

The government is also at the forefront of pushing the China-centric free trade agreement (FTA) Regional Comprehensive Economic Partnership (RCEP), especially while chairing ASEAN this year. But the government should be guided by the country’s history in being party to six FTAs, one bilateral FTA, various agreements under the multilateral World Trade Organization (WTO), and at least 31 bilateral investment treaties (BITs). The Philippines’ participation in these and the continued implementation of market-oriented domestic laws and policies have made the country more open than its neighbors in Southeast Asia in many aspects of foreign trade and investment. Hence backward Philippine agriculture and a declining Filipino industry compensated for by the bloating of a largely low value-added and low productivity service sector.

The government is misguided with its ‘Build build build’ infrastructure thrust. More than anything else, this merely aims to stimulate short-term economic growth and maintain the illusion of growth and development. The argument that infrastructure is the economy’s main binding constraint and that growth and development will be spurred by a massive infrastructure drive is appealing but simplistic. The Marcos dictatorship and, more recently, the previous Aquino administration used the same infrastructure-intensive approach but the economy remains backward and the majority are still poor. As it is local oligarchs and their foreign partners are into and further targeting public-private partnership (PPP) tickets for building roads and rails, airports, seaports and parks and the like with government guaranteeing private profits with public funds.

The infrastructure thrust further threatens to increase public debt and other burdens on the people. The prospect of cheap Chinese financing from loans and official development assistance (ODA) is being dangled. Yet there is no transparency in these and the hidden costs and dangers could mean a serious explosion of debt in the future. There is also the problem of tied aid and relying on Chinese contractors which may not mean the right infrastructure at the best price.

Moreover, the administration’s dealings with China and countries other than the United States should not replicate the one-sided terms with the US, Japan and Europe. A more definite framework of national economic development is still needed to ensure that the Philippines is not just shifting from one dependency to another. The nation has not seen the Duterte government more solidly asserting independent foreign economic policy amid an evolving global economy.

The US remains the single-biggest foreign influence on Philippine economic policy making. US geopolitical interests in the Philippines are also unchanged.

Peace and prospects. The peace negotiations between the National Democratic Front (NDF) and the Government of the Philippines (GRP) is an opportunity to tackle and concretely begin the blueprint for much-needed social and economic reforms. Both sides agreeing on the nature of the country’s agrarian problems and  the need for free land distribution is unprecedented, but overall prospects in the continuation of the talks falter amid various political dynamics. It is unfortunate to observe that the sections of Filipino communities determined in asserting their social economic and cultural rights are among the primary targets of human rights violations.

The economic crisis and the conditions of the people will only worsen unless the Duterte government corrects its misguided, anti-people and anti-development economic policies.